Australian businesses risk missing out on Southeast Asia’s looming economic boom, Foreign Minister Penny Wong said, expressing frustration at the struggle to spur more private investment in near neighbours.

Foreign direct investment in Southeast Asia was lower in 2022, when Wong’s Labor Party came to power, than in 2014, she told an Australian Financial Review conference on Tuesday. Not a single Southeast Asian nation is in Australia’s top 20 destinations for foreign investment, government data showed.

Wong said she had seen scant progress in corporate ties between Australia and its northern neighbours, even though Southeast Asia is expected to be the world’s fourth largest economy by 2040 with an expanding population. The foreign minister worries that Australian firms will fail to capitalise on the opportunity.

“The US is there, China is there, Canada’s there, others are there, and they are growing, and we will have a diminishing share of a growing market,” she said. “That is not a recipe for either geopolitical weight or economic prosperity.” 

The scale and growth of foreign direct investment into Asean nations by Canada and China has “far outstripped” Australia, according the Department of Foreign Affairs and Trade. Chinese investment stocks in Southeast Asia almost doubled between 2016 and 2020, and Canadian stocks grew almost fourfold, it said.

Wong’s call to spur ties with the surrounding region comes as a slowdown in key trading partner China sends the price of iron ore, Australia’s largest export, tumbling below US$100 a ton. At the same time, a global shift towards clean energy is going to keep eroding the nation’s coal industry.

Australia has moved to boost diplomatic ties with its near neighbours since 2022, particularly in Southeast Asia and the Pacific. To spur economic links between businesses and the region, Prime Minister Anthony Albanese announced a A$95 million (US$64 million or RM280.36 million) package to facilitate investment in 2023.

Former Macquarie Group Ltd chief executive officer Nicholas Moore, who was commissioned to create a Southeast Asian economic plan for Australia, told Bloomberg last year that fears of volatility in the region were overrated.

Southeast Asia is “critical for Australia’s prosperity and security”, Moore said in his final report.

  - Bloomberg